Make-up is making a big splash in retail. See what e.l.f. and Macy's have in common and check out Amazon in the hot seat. Read the Relevance Report.
The BRRR goes semi-three-dot this week: Three meaty morsels, so rich you’ll want to eat them with a fork. But use a spoon, so you don’t miss a drop.
What color is your unicorn?
t’s not every day that you get a unicorn story in retail. In fact the financial news in retail has been a bit dour these days.
But here comes e.l.f. Beauty pulling off a fabulous initial stock offering, its stock rocketing up 56 percent in its first day of trading, according to Fox Business. e.l.f., which stands for eyes, lips and face, has been around for a dozen years, but the BRRR must admit it only recently became familiar with the company.
Perhaps, it’s because we just rely on our natural beauty, though, admittedly, a little face powder would do us a world of good.
At any rate, e.l.f.’s IPO and its first-day closing price of $26.50, values the company $1.18 billion, according to The Wall Street Journal, putting the cosmetic company in official unicorn territory.
The company, with nearly $100 million in sales during the first half of the year, has an intriguing business model that could certainly be a chapter in the omnichannel playbook. It offers most of its products — lipstick, eyeliner, face-care potions etc. — for less than $6 each, the WSJ says.
It’s a big hit with millennials, Fox says, the millennials who are leading the charge of reshaping consumer behavior. e.l.f. sells online and in 19,000 retail stores, including Target, Walmart, Ulta, Old Navy, CVS and the Gap.
The company also runs nine of its own stores in New York City and its surroundings. Company executives say they intend to expand their brick-and-mortar operation to high-traffic areas across the nation.
When you think of Sephora, Birchbox, Ulta and all the old-school cosmetics companies, it seems like a pretty crowded field, but e.l.f.’s revenues have been on a healthy trajectory. Fox notes that the company’s $96.8 million in first-half revenue this year is up from $75.2 in the same period of 2015.
So maybe this unicorn isn’t so mythical.
Sure, Amazon helps you find stuff, but …
Amazon is taking some grief after ProPublica conducted a huge experiment to figure out whether Amazon’s search results favored, well, Amazon.
The watchdog publication concluded that Amazon’s algorithms did indeed tilt the playing field to the starship in Seattle. In particular, ProPublica concluded, Amazon’s algos present shoppers with products it is selling, even when other Amazon-based vendors offered the same thing at a lower price. Here’s a condensed version of the story, produced by The Mercury News.
ProPublica monitored 250 frequently purchased products on Amazon for weeks, the Merc said, to see what showed up in the “buy box,” Amazon’s suggestion to searchers. About 75 percent of the time, products Amazon was selling directly or products being sold by vendors who were paying Amazon for services, showed up in better positions than product offered by third-party sellers — even when the third-party price was lower.
Scandalous, right? Well, this is where things get tricky. It seems shipping costs played a significant role in pricing differences — and as Amazon pointed out, shipping costs are irrelevant to a large bucket of its customers. Amazon Prime members can order a staggering number of items that come with free shipping.
Still, there are some larger points here. First, it’s wise to keep an eye on how Amazon steers consumers to products for the simple reason that a plurality of online shoppers turn to Amazon first when shopping online. A year ago, Survata, in a survey commissioned by BloomReach, found that 44 percent of shoppers head to Amazon first, when looking for or researching a product.
That compares to 34 percent who use search engines first and 21 percent who initially go to a retailer’s site.
The other point the ProPublica story brings up is that consumers love Amazon. If you read the reader comments that follow the reports on ProPublica and the Merc’s site, you’ll see a portion that appear to argue that the headline of the story should have been, “Duh.”
They’ve got no problem with a company pushing its own interests. And they point out that there are ways to broadly compare prices no matter the suggestions Amazon makes. Consider this comment from cosmicunity on the Merc’s story (edited for clarity):
“I know sometimes I can get a product I see on Amazon locally for cheaper. But unless we’re talking 20 to 30 percent cheaper, for a fairly costly item, I usually don’t anyway. I am a Prime member and that $100 a year is well worth it. Usually always buy a Prime item, even if it’s a little costlier. Free two/three day shipping. Also, their return policy is the best I have ever seen. Many times I have told them I am dissatisfied with a product and they refund me, while also telling me to keep it. That doesn’t happen at any big box or mom and pop place that I know of.
Not that the Amazon love is unanimous. This, from GSGregory on the ProPublica piece — and in response to a post arguing that consumers can do the math to figure out how shipping costs affect the total they will have to pay. Again, edited for clarity:
“So showing customers a list labeled as price+ shipping, but showing certain items as only price, is not lying? If you went to Walmart and all non-Walmart brands were shown with the tax included and all Walmart brands were shown on the shelf at a non-taxed price, would you consider that fair business?
The people have spoken.
Macy’s pretties itself up to boost customer experience
Speaking of beauty, which we were in item No. 1, get this: Macy’s is turning to the Uber of beauty to diversify its business and boost its customer experience.
Reuters reports that the iconic retailer is partnering with beGlammed, which offers house calls for makeup and grooming services. It’s part of a strategy to focus on beauty products to slow the slide in sales.
The wire service points out that JCPenney has had success placing Sephora counters within its stores. The Macy’s deal means customers can go online and order up a bridal makeup job or other beautification project, ranging in cost from $25 to $185.
Macy’s is moving big-time into the beauty sector, Reuters reports, having purchased Bluemercury in 2015. The beauty move comes in addition to store-in-store plays with Best Buy and the announcement that Macy’s will open an Apple store within its iconic 34th Street Macy’s in Manhattan.
Quote of the week
“Results showed that customers want a shopping experience that is easier and more personal and products within the stores to match, including more in-store assistance and customized services.” — Marc Ehle, Office Depot senior vice president of North America retail sales, to the Reno Gazette-Journal, on the occasion of the opening of the “store of the future.”
Mike Cassidy is BloomReach’s storyteller. Contact him at email@example.com; follow him on Twitter at @mikecassidy.